Question

Difference between absolute and relative taxable capacity

Answer 1

Answer:

While, relative taxable capacity refers to the comparison between the absolute taxable capacity of different tax payers, or industries or groups of tax-payers. Here, the concept of ability to pay comes into the picture. ... In a sense, totality of a country's resources may limit absolute taxable capacity.

Answer 2

The absolute taxable capacity refers to the maximum amount of tax that can be collected from a country region or economy. Whereas relative taxable capacity refers to the comparison of the absolute taxable capacity of two different taxpayers.

Explanation:

Absolute taxable capacity

• The absolute taxable capacity of an individual is the difference between his income and expenditure.
• The  taxable capacity of a company is shown by the difference between total production and total consumption by the people in the economy

Relative taxable capacity

• The relative taxable capacity refers to the amount or proportion of taxes that are contributed by two taxpayers for meeting a common expenditure
• The relative approach of taxable-capacity helps the government on allocating the taxes for different communities according to  their ability to pay.

To know more about Capacity to pay

How to classify a tax as direct tax or indirect tax?

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